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An MCDA-based Approach for Creditworthiness Assessment

Author

Listed:
  • Marco Corazza

    (Department of Applied Mathematics, University of Venice)

  • Stefania Funari

    (Department of Applied Mathematics, University of Venice)

  • Federico Siviero

    (Cohen & Company, Subsidiary of London)

Abstract

In this paper we propose a deterministic methodology for creditworthiness evaluation based on the Multi-Criteria Decision Analysis (MCDA) method known as MUlticriteria RAnking MEthod (MURAME). This approach allows to rank the firms according to their credit risk characteristics and to sort them into a prefixed number of homogeneous creditworthiness groups. Moreover, the methodology allows to estimate ex-post proxies of the probabilities of default and of the probabilities of transition. Then, we apply the proposed approach to check its capability to evaluate the creditworthiness in real cases; in particular, we consider the case of an important north eastern Italian bank.

Suggested Citation

  • Marco Corazza & Stefania Funari & Federico Siviero, 2008. "An MCDA-based Approach for Creditworthiness Assessment," Working Papers 177, Department of Applied Mathematics, Università Ca' Foscari Venezia.
    • Handle: RePEc:vnm:wpaper:177
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    References listed on IDEAS

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    3. Doumpos, M. & Kosmidou, K. & Baourakis, G. & Zopounidis, C., 2002. "Credit risk assessment using a multicriteria hierarchical discrimination approach: A comparative analysis," European Journal of Operational Research, Elsevier, vol. 138(2), pages 392-412, April.
    4. Zopounidis, Constantin & Doumpos, Michael, 2002. "Multicriteria classification and sorting methods: A literature review," European Journal of Operational Research, Elsevier, vol. 138(2), pages 229-246, April.
    5. JosÉ Figueira & Salvatore Greco & Matthias Ehrogott, 2005. "Multiple Criteria Decision Analysis: State of the Art Surveys," International Series in Operations Research and Management Science, Springer, number 978-0-387-23081-8, December.
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    8. Kosmidou K. & Doumpos M. & Zopounidis C., 2002. "A Multicriteria Hierarchical Discrimination Approach for Credit Risk Problems," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 53-68, January -.
    9. Michael Doumpos & Fotios Pasiouras, 2005. "Developing and Testing Models for Replicating Credit Ratings: A Multicriteria Approach," Computational Economics, Springer;Society for Computational Economics, vol. 25(4), pages 327-341, June.
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    Cited by:

    1. Marco Corazza & Stefania Funari & Riccardo Gusso, 2012. "An evolutionary approach to preference disaggregation in a MURAME-based credit scoring problem," Working Papers 5, Department of Management, Università Ca' Foscari Venezia.

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    More about this item

    Keywords

    Multi-Criteria Decision Analysis (or MCDA); MUlti-criteria RAnking MEthod (or MURAME); credit risk assessment;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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